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Can you perceive our democratic process functions? Maybe something like this. Citizens choose MPs. They legislate on bills. When a majority is secured, the bills become law. Legislation is upheld by the courts. That's it. Yet, that was how it operated in the past. No longer.

The Emergence of Shadow Arbitration Panels

Today, overseas companies, or the oligarchs behind them, have the power to sue governments for the regulations they pass, at private courts staffed by business advocates. The cases take place behind closed doors. In contrast to domestic courts, these tribunals grant no opportunity to appeal or judicial review. The general public cannot take a case to them, and neither can our government, or even businesses based in this country. The door is open solely for entities registered abroad.

Should an arbitration panel finds that a legislative action may compromise the corporation’s projected profits, it can award financial penalties of hundreds of millions of pounds, potentially billions.

These sums constitute not actual losses but money the panel members determine the company could potentially have made. The government could be forced to drop the legislation. It will be deterred from introducing similar legislation of a similar nature, worried about facing litigation.

A Process Running Rampant

Historically high figures of cases are being filed, as firms observe each other, and investment funds bankroll lawsuits in return for a share of the awards. The outcome? Sovereignty and popular rule are becoming unaffordable.

This mechanism is called “investor-state dispute settlement” (ISDS). The explanation it can trump a country's own laws and the rulings made by parliaments is that this provision has been written – without public consent, and typically amid a climate of extreme secrecy – within international trade agreements.

A Concrete Case: The Cumbrian Coal Mine

A year ago, a conservation group achieved a major legal triumph at the High Court. The justice determined that plans to open the first major coal mine in the UK for a generation, in northwest England, had been wrongly permitted by the outgoing administration, which had endorsed the extraordinary assertion that the mine would have zero effect on our carbon budgets. The incoming administration subsequently revoked the permission the Tories had granted. Today, this success faces being overturned by an secret arbitration panel accountable to exclusively the companies bringing the case.

Last August, a company whose beneficial owners are based in the tax haven initiated proceedings challenging the UK government. Recently a arbitration panel in the US capital was convened to adjudicate on it.

This firm is litigating against the UK for the profits it might have made if the mine had received permission to commence operations. The public has no clear indication how much this could amount to. Which individual is serving as its counsel against the UK administration? A member of parliament, and former attorney-general in the outgoing administration, the noted patriot the MP. The government enacts a policy, the high court upholds it, then a international entity disputes it through an undemocratic arbitration panel, and a sitting MP represents its behalf.

A Sanctions Challenge

On the same day that the panel on the mining lawsuit was established, it was revealed from a ministerial statement that the UK is also being sued under ISDS by a Russian billionaire, Mikhail Fridman. The public knows little of the case to date, but it is highly possible that he may employ the tribunal to contest the sanctions the UK enacted against him subsequent to the Russian aggression. He has already started suing a small nation for this reason, claiming $16bn: half that government’s yearly income. Among the legal team acting for him in that case? Cherie Blair, married to the ex-UK leader.

Legal experts contend that the EU’s hesitation in utilising seized state funds as security for its aid for Ukraine stems from apprehension in Brussels that it could be sued in the ISDS tribunals, under a bilateral investment treaty. This extraordinary, secretive influence over democratic administrations may be obstructing the funds Ukraine desperately needs.

Empty Promises and Growing Threats

We were assured that these events were not possible. In 2014, a former prime minister, promoting the most significant and hazardous of all investment pacts, told us: “Britain has agreed to trade agreement after trade deal and we have never seen a problem in the past.” An expert on this topic described campaigners of “scaremongering … the fact is, ISDS does not affect the UK much”. The prevailing narrative seemed to be that solely developing countries had to worry about ISDS claims. Warnings that “once firms begin to understand the power bestowed upon them, they will redirect their efforts from the weak nations to the strong ones” were met with widespread derision.

That prediction is now a reality. In the current period, oil and gas and extraction companies have filed a unprecedented number of claims against nations both wealthy and developing, challenging – similar to the Cumbrian coalmine – official measures to stop environmental catastrophe. Corporations have so far won $114bn by using ISDS, of which oil majors have secured eighty-four billion dollars. That represents the combined GDP